Abstract
Israel’s Child Development Account (CDA) program, the Savings for Every Child Program (SECP), is universal and automatically enrolls all children under the age of 18, depositing 51 shekels (approximately USD 14) into their accounts every month. Parents can double this savings amount and can choose an investment vehicle for their children’s deposits. The total realized benefits from the SECP depend heavily on parents’ choices. This study examines how demographic, financial, and intrinsic personality characteristics predict household participation in this program. Using a unique data set combining administrative and survey data, we find that household religion/ethnicity, parental education, and financial circumstances were the most significant predictors of household engagement with the SECP. Important differences in program enrollment and participation are observed by household religion/ethnicity. Our study informs potential policy designs of CDA programs, especially in middle- and high-income countries, and have implications for enabling less-educated and religious/ethnic minority households to save for their children’s future.
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Data are not available due to legal restrictions.
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The code used to generate research findings is available upon request.
Change history
11 March 2022
A Correction to this paper has been published: https://doi.org/10.1007/s10834-022-09833-4
Notes
For a more detailed description of the program, see Grinstein-Weiss et al. (2019a).
Since the SECP funds are expected to be invested for the period of 18 years, each account can be assumed to have similarly low risk levels in the long run. In the short run, the potential risk levels tend to correspond to the expected levels of return; that is, low-, medium-, and high- yield accounts may be associated with low, medium, and high short-term risk levels, respectively.
We also estimated (1) a logistic regression model instead of the linear regression model, and (2) a two-stage regression model to correct for self-selection for decisions to invest in a higher-yield investment fund and to deposit an additional NIS 50. The results remained largely consistent with the findings reported in this section and can be presented upon request.
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We thank Daniel Gottlieb and Netanela Barkali for their research support. This manuscript reflects research work conducted by the authors, and does not necessarily represent the views or opinions of the National Insurance Institute of Israel. The authors accept all responsibilities for errors or omissions.
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Haran Rosen, M., Pinto, O., Kondratjeva, O. et al. Household Savings Decisions in Israel’s Child Savings Program: The Role of Demographic, Financial, and Intrinsic Factors. J Fam Econ Iss 42, 368–386 (2021). https://doi.org/10.1007/s10834-020-09724-6
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DOI: https://doi.org/10.1007/s10834-020-09724-6